Calls for tax hikes rely on faulty data
Big-government advocates are calling for massive tax hikes with increasing regularity in Nevada. They claim that state government is grossly underfunded and, as a result, the legislature should force Nevadans to shoulder heavier tax burdens. However, such assertions rely on misunderstandings or misrepresentations of the facts.
A recent article in the Las Vegas Sun is prime evidence. The author, Dr. Elliot Parker an economics professor at the University of Nevada, Reno, decries the fact that, according to the Tax Foundation, Nevada residents have the second-lowest direct tax burden among the 50 states. This low tax burden, the author claims, is responsible for what he sees as the deplorable fact that Nevada has fewer government workers per capita than do other states. He concludes that taxes should be raised in order to hire more government workers and to pay each worker more – including workers at the state's government-operated universities, where the author himself is employed.
This reasoning misleads readers on several issues. First and foremost, by only stressing the portion of state taxes that Nevada families pay directly (as the Tax Foundation does), the author mischaracterizes the magnitude of the tax burden on those families.
According to data maintained by the Nevada Economic Forum, gaming and sales taxes account for about 65 percent of the state's general fund revenues. While most of these taxes are paid by residents of other states who visit Nevada as tourists, these taxes still significantly impact Nevada families. As NPRI has highlighted in the past, taxing tourists translates into less income for the hotel and gaming industries in Nevada. As these industries receive less income to pay wages, workers in these industries are the ones who bear the true burden of the higher taxes through lower wages and higher unemployment rates.
Because this tax burden is paid indirectly by Nevada families, it is easy for big-government advocates to mislead the public in their continual quest to enrich an increasingly feudal ruling class.
A more accurate representation of the tax burden Nevadans are forced to shoulder is found in the amount of taxes actually collected. In Nevada, this has been on the rise. In FY08, state general fund collections amounted to $1,095 for every man, woman and child. Five years earlier, in FY03, the inflation-adjusted value was only $920. As NPRI continues to point out, however, general fund collections are becoming increasingly less important as a measure of the tax burden in the state. General fund spending amounts to only 37.5 percent of the state budget, according to the Department of Administration. In addition, local governments make up a significant share of the overall tax burden.
The level of misunderstanding or misrepresentation propagated in the recent Sun article is further illustrated by other reports on the overall cost of government in Nevada. According to data maintained by the US Census Bureau, this rose from $6,352 per person in 1992 to a whopping $7,763 per person in 2006. And if one looks at data from the source the author cites – the Tax Foundation – the increase is even more. Tax Foundation figures for state and local tax revenues per household in 2007 put Nevada at 21st overall. Indeed, at $10,994 per household Nevada is $654 dollars above the median.
The Sun article contends that a supposedly inadequate tax revenue stream has left state and local governments shorthanded and unable to hire enough employees. The author links the state's relative low taxes to the fact that Nevada, among the 50 states, has the lowest percentage of workers employed by government. A government employee himself, the author apparently gives no credence to the possibility that government employees in Nevada might simply be more efficient than government workers elsewhere.
Well, he should know. Nevada taxpayers are paying him the full salary of a tenured professor while he only teaches two courses per semester. The normal load is four. (Apparently, his load is still too heavy and he'd like the university to be able to afford to hire more professors to lighten his burden.)
Nevada's lower public employment is most likely due to the fact that government workers are so lavishly reimbursed here. Again, the very source used by the author to argue that public employment is relatively low in Nevada – the Statistical Abstract of the United States – also shows that government employees here receive extremely high pay rates. In 2006, Nevada state employees on average received the 16th highest pay rates for state employees among the 50 states. Local government employees in Nevada managed to top this ranking – receiving the 6th highest pay rates in the nation.
Of course, this was before state employees received an 8.5 percent pay raise this year after having received a 6.5 percent pay raise last year. It also omits the extremely generous benefits and retirement packages received by public employees in Nevada.
Big government advocates such as the author of the Sun article would like the salaries for government employees to continue to skyrocket in Nevada and for the government to hire even more workers.
What's more, he wants this to happen while private individuals in Nevada suffer through a recession – he'd take bread off their family dinner table to give it to the ruling class.
It is bad enough when predatory interests use the force of government to steal from private families in Nevada, but now they want to lie to them as well.
Geoffrey Lawrence is fiscal policy analyst at the Nevada Policy Research Institute.